GAO: Obama Calls for Extension Of Lending Program Nobody Wants

Two federal programs created to promote small-business lending, one of which President Obama wishes to extend, have experienced lower-than-expected demand from banks and state governments.

According to a report released by the Government Accountability Office on Thursday, the State Small Business Credit Initiative (SSBCI) has only given out about 60 percent of its allocation, while the Small Business Lending Fund (SBLF) has awarded just $4 billion out of the $30 billion it was authorized to spend.

“Overall, SSBCI participants have used about $869 million of the $1.5 billion in allocated funds,” because although 47 states signed up to participate in the program, the degree to which they have utilized the program has varied widely. GAO claims that “seven participants have used 25 percent or less of their allocations, while 10 have used 90 percent or more of their allocations,” and three others used one percent or less.

Despite the lackluster response, President Obama’s proposed budget for FY 2015 “recommended new legislation that would reauthorize SSBCI and provide an additional $1.5 billion in program funding.” The program is currently scheduled to expire on September 27, 2017, but the reauthorization would extend it through 2021.

SBLF is also designed to promote small-business lending, but rather than acting through the intermediary of state programs, it works directly with private lenders “to encourage banks and community development loan funds (CDLF) with assets of $10 billion or less to increase their lending to small businesses with up to $50 million in annual revenues.”

Over the past four years, the SBLF has received applications from 935 financial institutions for a combined funding request of $11.7 billion, and has approved 332 institutions for a total of $4 billion in funds.

Moreover, “as of June 30, 2014, a total of 41 institutions (12 percent) had exited the program… by repaying the funding provided along with dividends or interest owed for that period,” suggesting that even some lenders that did participate eventually determined that the program was not in their best interests.

Content created by The Daily Caller News Foundation is available without charge to any eligible news publisher that can provide a large audience. For licensing opportunities of our original content, please contact licensing@dailycallernewsfoundation.org.

Stay in the loop on killer content,exclusive videos, and much more!

Join the discussion. Leave a comment.

We have no tolerance for comments containing violence, racism, vulgarity, profanity, all caps, or discourteous behavior. Thank you for partnering with us to maintain a courteous and useful public environment where we can engage in reasonable discourse.